Tokenized Catastrophe Bonds Target the Disaster Insurance Gap

Natural disasters caused $220 billion in economic losses last year, but insurance covered only $107 billion, according to Swiss Re, leaving households, businesses and governments to absorb the rest.

Capital keeps flowing into catastrophe bonds, which let insurers pass the risk of hurricanes, wildfires and earthquakes to capital market investors. The market had $65.6 billion outstanding in June, and second quarter issuance hit $11.3 billion, a record quarterly total, per a recent cat bond report from Artemis.

Bermuda Issuance Would Put Legal Ownership Onchain

Harneys, a Bermuda based law firm specializing in global insurance, and tokenization platform dropRWA plan to issue tokenized cat bonds early next year, with each token representing legal ownership of the bond.

Many traditional offerings carry minimum investments of $250,000 or more. The firms are considering a structure that could support smaller interests while complying with securities and investor protection rules.

Henry Tucker, chief executive of specialist insurance group Hearns, said a tokenized structure does not make disaster coverage a casual retail investment, since capital is fully committed to a defined risk.

World Bank Precedent Shows Real Demand

The World Bank arranged $200 million of hurricane coverage for Jamaica in May, replacing a transaction that paid out after Hurricane Melissa in 2025. Jamaica’s finance minister, Fayval Williams, called cat bonds an important piece of the country’s resilience strategy.

Tokenization will not make disasters cheaper, Tucker said, but smaller ownership units could bring more investors into a market built to absorb extreme losses.